These Emerging Tech Stocks Make Their Mark

Talk about a selective market. All the major equity indices rallied higher with the S&P 500 and the NASDAQ Composite finishing at record highs.

There were significantly more decliners on both the NY Stock Exchange and the NASDAQ, yet with substantially more 52-week winners than decliners.

There is a whole lot of chasing going on, but it also happens when there is a sense that a company is a fundamental winner and buyers are pouncing. I mentioned this would happen once the S&P 500 broke out to new highs. The action is not about a bunch of Robinhood investors, as the amount of money pouring in is much larger than the smaller average accounts of those millennial investors.

Be that as it may, how much of this is hysteria or irrational exuberance?

I do not see irrational exuberance. Instead, investors are piling into winners. Not stock winners, but fundamental game-changing companies that we have been promised would one day take their place in society - from ideas to development and now wider distribution.

If these were irrational, all stocks would be higher as investors would simply throw darts. As market breadth has attested in the last two weeks, investors have become more selective. Moreover, many of the most exciting stocks are not in any of the major equity indices. Those names are lighting it up, because they are lighting up the world.

Just imagine if the world had to shut down just one year earlier. Even here in the United States, a year ago, a massive lockdown would have seen so much economic damage. 

Working from home is a privilege, but it’s one so many more folks can take advantage of at this moment.

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Emerging Tech Making Its Mark

After the close, many of the emerging superstars of technology and the market posted financial results.  The initial reactions to those results underscored why investors are chasing them. Winners keep winning when the fundamentals keep improving.

Results

• Earnings per share (EPS): $0.18 vs $0.05, +12.0%
• Revenue: +11.5%, $192.3M vs consensus $189.62M
• Billings: +9% @ $188.8M

Guidance

• Third-quarter 2020 (Q320) Earnings per share (EPS): $0.13-$0.15 vs $0.06 consensus, Revenue: $193-$195M vs $192.8M
• Fiscal year 2021 (FY21) Earnings per share (EPS): $0.56-$0.60 vs $0.24 consensus, Revenue: $767-$770M vs $765.10M

Results

• Earnings per share (EPS): $0.24 vs -$0.18
• Revenue: +43.7%, $128.9M vs $120.9M
• Subscription customer count: 12k vs 11,300 (Q4FY20), 8,800 (Q1FY29)

Guidance

• Second-quarter 2020 (Q20) Earnings per share (EPS): -$0.22 to -$0.20 vs -$0.24 consensus, Revenue: $129-$131M vs $128.9M
• Fiscal year 2021 (FY21) Earnings per share (EPS): -$0.83 to -$0.69 vs -$0.91 consensus, Revenue: $544-$550M vs $537.31M 

Results

• Loss: -$0.33 vs -$0.34
• Revenue: -4.8% $491.6M vs $520.28 consensus
• Cloud Annualized recurring revenue (ARR): +89% @ $568M
• Total ARR: +50% @ $1.93B

Guidance Q3:

• Revenue: $600-630M vs $638.88M

Establish New Tech Winners

Technology and Communication Services dominated the top 12% winners list: 

Communication Services (XLC) enjoyed a 3.4% move on the session.

Portfolio Approach

Yesterday, we took profits in three stocks, added to an existing position, and went long a new Consumer Discretionary company in our Hotline Model Portfolio.

Today’s Session

Initial jobless claims came in as expected, which is demoralizing, especially as Congress remains on recess.

To see the charts click here, and here.

Meanwhile, all eyes and ears are on Jerome Powell as he unveils sweeping changes in how the Fed approaches policy to achieve the elusive goal of sustained 2.0% inflation.

We are listening and taking notes.

News that Abbott Labs (ABT) has received FDA approval for $5.00 coronavirus test is huge for society and the stock market.  Part of this amazing rally has been the dramatic decline in Covid-19 cases.